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More Renters Left With Foreclosed Properties

A new wave of foreclosures could harm people who may have never even taken out a mortgage: renters. In cities like New York, Chicago, and Los Angeles, where many investors are carrying upside-down mortgages on large rental buildings, some tenants are seeing their homes fall apart along with the financing.

In the first three quarters of 2009, 475 foreclosure proceedings were begun against multifamily rental or cooperative homes in Washington D.C., according to NeighborhoodInfo DC, a partnership between the Urban Institute and the D.C. Local Initiatives Support Corp. That figure already eclipses the 458 foreclosures for all of 2008.

In Cook County in Illinois, 328 multifamily rental buildings were in foreclosure by the second quarter of 2009, in comparison to 185 in 2008, according to a study by the Institute for Housing Studies at DePaul University, which has not yet been released.

In Los Angeles, foreclosures for buildings with five or more units totaled 78, encompassing 1,344 units, within the first three quarters of the year, in comparison to 49 buildings and 432 units last year during the same time period and 13 buildings and 239 units in 2007.

New York housing analysts estimate the number of apartment units in the city that are at risk of default due to upside-down loans (property is worth less than is owed on the loan) to be between 50,000 and 100,000.

During the first nine months of 2009, Fannie Mae foreclosed upon 74 multifamily properties, in comparison to 25 during the same period in 2008.

The pattern has also showed up in smaller cities such as Lexington, North Carolina and Des Moines, Iowa.

The impact upon tenants is uneven. According to officials in New York City, the owners of the vast majority of buildings in foreclosure are likely to maintain decent standards of living. However, of the 200 properties on the city housing agency’s 2008 list of buildings with the most severe maintenance problems, at least 77 had been in foreclosure.

In buildings with a struggling landlord, maintenance will typically be the first thing to go. Garbage can pile up, lists of overdue repairs lengthen, and vermin multiply.

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